SEBI issued a Consultation Paper dated May 9, 2025 ('Consultation Paper') on providing flexibility to AIFs to offer co-investment opportunities to investors within the AIF Regulations through a co-investment vehicle ('CIV'). Key highlights are:
i. CIV will be a scheme of the AIF (Category I/ Category II) to facilitate co-investment by investors (being 'Accredited Investors' only) in securities of investee companies;
ii. a shelf private placement memorandum ('PPM') for such CIV scheme will be filed with SEBI at the time of AIF registration, if co-investment facilities are to be offered. Existing AIFs will also be eligible to file a shelf PPM for creating a CIV;
iii. a new CIV scheme must be launched for each co-investment, under intimation to SEBI, and each scheme must have separate PAN, bank, and demat account;
iv. the CIV schemes will also be subject to implementation standards framed by the Standard Setting Forum to ensure investments are made for bona fide purposes and prevent misuse of the CIV framework; and
v. each CIV scheme will be exempted from compliance obligations in relation to: (a) investment diversification norms; (b) manager/ sponsor commitment; and (c) minimum tenure.
SEBI, in its 210th board meeting held on June 18, 2025, has approved the CIV framework for unlisted securities. The new CIV framework within the AIF Regulations is expected to be in addition to the extant framework of co-investments through co-investment portfolio management route.
Originally published 29 July 2025
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